Pulliam v. Dyck-O‘Neal, Inc.
No. 1080
IN THE COURT OF SPECIAL APPEALS OF MARYLAND
November 1, 2019
Nazarian, Arthur, Wells, JJ. Opinion by Nazarian, J.
September Term, 2018. Circuit Court for Prince George‘s County Case No. CAEF13-27154. REPORTED.
REAL PROPERTY – FORECLOSURE – DEFICIENCY JUDGMENT
Deficiency judgments under
Case No. CAEF13-27154
REPORTED
IN THE COURT OF SPECIAL APPEALS
OF MARYLAND
No. 1080
September Term, 2018
______________________________________
RYAN PULLIAM
v.
DYCK-O‘NEAL, INC.
______________________________________
Nazarian,
Arthur,
Wells,
JJ.
______________________________________
Opinion by Nazarian, J.
______________________________________
Filed: November 1, 2019
After the foreclosure proceeding concluded, the Note was transferred twice, and landed in the hands of Dyck-O‘Neal, Inc. (“DONI“), a debt collector. DONI filed a motion for deficiency decree on the debt owed, which the court granted. Mr. Pulliam appeals, arguing that the court erred first, by failing to construe DONI‘s motion strictly, in accordance with
I. BACKGROUND
At the time they purchased their home, Mr. Pulliam and Ms. White executed the Note and promised to repay Pinnacle $390,000 at an annual interest rate of 7.125%, which yielded a monthly payment of $2,627.50. They fell behind in March 2009 and, so far as the record reflects, made no further payments after that. Four years later, in February 2013,
Nationstar appointed Substitute Trustees on June 7, 2013, authorizing them “to hold, collect and enforce the note.” On September 12, 2013, the Substitute Trustees initiated foreclosure proceedings by filing an Order to Docket under
- Notice of Foreclosure Action (Preliminary Loss Mitigation Affidavit)
- Preliminary Loss Mitigation Affidavit, Loss Mitigation Application
- Statement of Debt and plaintiffs have the right to foreclose
- Military Affidavit and DOD printout(s)
- Affidavit of Certifying Ownershiр of Note and that it is a true and accurate copy and Copy of Note
- Affidavit Pursuant to
Real Property Code 7-105.1(d)(ii) andRule 14-207 and copy of Deed of Trust, copy of Appointment of Substitute Trustees and Copy of Notice of Intent to Foreclose.
The Statement of Debt outlined the balance owed as follows:
| Remaining Balance Due | $380,530.14 |
| Interest from 2/1/2009 to 11/15/2012 | $102,712.94 |
| Late Charges | $__________ |
| Corporate Advances | $__________ |
| Escrow (credit)/debit | $42,761.66 |
Per Diem Interest: $74.28
Interest Rate: 7.125%
Neither Ms. White nor Mr. Pulliam sought to dismiss or stay the foreclosure, and the Substitute Trustees arranged for a sale of the Property on September 3, 2014. They provided notice of the “time, place, manner and terms of sale by advertisement in The Washington Post, a newspaper published in Prince George‘s County, Maryland, once a week for at least three successive weeks before the day of sale . . . .” Freddie Mac was the successful buyer with a bid of $187,000. The Substitute Trustees then filed a Report of Sale with the court on September 25, 2014. Neither Mr. Pulliam nor Ms. White filed any exceptions to the Report of Sale; the court ratified the sale on March 3, 2015, and neither party filed exceptions to the ratification. Finally, an auditor filed a report detailing that Mr. Pulliam and Ms. White owed $405,918.53 after the sale proceeds were deducted from their balance. Again, neither party filed exceptions and the court ratified the auditor‘s report on June 22, 2015.
In the time after ratification, the Note was transferred twice. Nationstar, the original loan servicer, assigned “all of its rights, title, and interest in and to any cause of action against [Mr. Pulliam and Ms. White] for a deficiency claim” to Freddie Mac on December 30, 2015. Freddie Mac then assigned the Note to DONI on January 7, 2016.
DONI filed a motion for deficiency decree on November 1, 2017, seeking judgment against Mr. Pulliam and Ms. White in the amount of the deficiency plus interest. Both opposed the motion by arguing that DONI failed to sеrve them, that DONI lacked authority
The court held a hearing on February 22, 2018, heard arguments both as to service and on the merits and, in an order entered on May 1, 2018, entered judgment against Ms. White (who then filed a petition seeking protection under federal bankruptcy law and has been discharged). On June 19, 2018, without holding an additional hearing, the court entered judgment against Mr. Pulliam in the amount of $405,918.53, plus prejudgment interest of $90,718.35, plus ongoing interest of $79.23 per day. Mr. Pulliam appeals. We supply additional facts as necessary below.
II. DISCUSSION
Mr. Pulliam asks us to vacate the deficiency judgment on several grounds.2 First, he contends that the court erred by failing to construe DONI‘s motion strictly in accordance
“[W]hile the trial court is granted broad discretion in granting or denying equitable relief, where an order [of the trial court] involves an interpretation and application of Maryland constitutional, statutory or case law, our Court must determine whether the trial court‘s conclusions are ‘legally correct’ under a de novo standard of review.” Schisler v. State, 394 Md. 519, 535 (2006); see also Ehrlich v. Perez, 394 Md. 691, 708 (2006).
A. The Foreclosure Proceeding Resolved The Creditor‘s Right To Enforce And The Deficiency.
1. Background
Mr. Pulliam‘s arguments confuse the rules governing orders to docket and deficiency judgments.
In 2008, as the national housing-driven financial crisis emerged, the General Assembly enacted several emergency provisions governing foreclosures of residential real property. 2008 Md. Laws, Chap. 4; 2008 Md. Laws, Chap. 6; 2008 Md. Laws, Chap. 2. Most notably for this case, Chapter 2 of the 2008 Maryland Laws instituted time restrictions on the filing of foreclosure actions, provided for immediate foreclosure actions in limited circumstances, and required lenders to send a notice оf intent to foreclose to the debtor.
The Maryland Rules then were amended to track these changes, first through emergency proposals submitted to the Court of Appeals in June 2008, then in a more detailed set of revisions the follоwing year. The Rules Committee was concerned with “strik[ing] a fair balance by providing borrowers and others with sufficient standing, who have a legitimate defense to the foreclosure, a reasonable and practical opportunity to raise the defense, but not allowing for frivolous motions intended solely to delay the proceeding.” 160th Rep. of the Rules Comm. at 7. The Court of Appeals adopted in 2009 the version of the Title 14 Rules in effect today. See
2. The Order to Docket
After default, “any individual authorized to exercise a power of sale” may begin an
This appeal picks up after the foreclosure process was completed. Mr. Pulliam and Ms. White defaulted on March 2, 2009. Nationstar, the servicer with authority to enforce the Note, started foreclosure proceedings and filed an order to docket on September 12, 2013 that included an Affidavit of Note Ownership demonstrating its right to enforce the Note:
I solemnly affirm under the penalties of perjury that to the best of my knowledge, information and belief, Federal Home Loan Mortgage Corporation is the current owner of the attached Note dated September 29, 2006 in the amount of $390,000.00 given by Ryan Jafi Pulliam and Bree-Ann White, and Nationstar Mortgage, LLC is the holder of the Note having been transferred to Nationstar Mortgage, LLC for the purposes of enforcement and conducting this foreclosure action and the attached Note is a true and accurate copy.
Although Maryland‘s foreclosure procedures are expedited compared to standard civil actions, mortgagors are not without options to defend the claim. “Maryland‘s foreclosure procedure was equitable in nature,” and the matter “must not be marred by any fraudulent, illegal, or inequitable conduct.” Mitchell v. Yacko, 232 Md. App. 624, 637–38 (2017) (quoting Wells Fargo Home Mortg., Inc. v. Neal, 398 Md. 705 (2007)). During this procedural process, mortgagors can object in three ways:
[O]btaining a pre-sale injunction pursuant to
Maryland Rule 14–209(b)(1) , filing post-sale exсeptions to the ratification of the sale underMaryland Rule 14–305(d) , and the filing of post-sale ratification exceptions to the auditor‘s statement of account pursuant toMaryland Rule 2–543(g) ,(h) .
Wells Fargo, 398 Md. at 726; Mitchell, 232 Md. App. at 637. Mortgagors with defenses to the foreclosure may raise them within fifteen days of the last of various procedural milestones.
Here, Mr. Pulliam and Ms. White had three opportunities to file exceptions: when the order to docket was filed in September 2013, when the sale was ratified in March 2015, and when the auditor‘s report was filed in June 2015. But they didn‘t, and the foreclosure went uncontested. And once a foreclosure has ended, most attacks on its validity are barred. “The effect of a final ratification of sale is res judicata as to the validity of such sale, except in the case of fraud or illegality.” Jones v. Rosenberg, 178 Md. App. 54, 72 (2008); see Manigan v. Burson, 160 Md. App. 114, 120 (2004) (“Ordinarily, upon the court‘s ratification of a foreclosure sale objections to the propriety of the foreclosure will no longer be entertained“). Mr. Pulliam has not made any allegations of fraud or illegality, and so the results of the foreclosure proceeding—including the fact and amount of the deficiency—hаve been adjudicated and are not before us except as inputs to the next stage, the deficiency decree.
B. The Circuit Court Did Not Err In Granting The Motion For A Deficiency Decree.
1. The Motion for Deficiency Judgment Was Proper.
Deficiency judgments follow foreclosure proceedings and provide a remedy to a
Mr. Pulliam argues first that the order of deficiency judgment should be vacated because the court failed to construe the requirements of
We see no deviation from the requirements of
At any time within three years after the final ratification of the auditor‘s report, a secured party or any appropriate party in interest may file a motion for a deficiency judgment if the proceeds of the sale, after deducting all costs and expenses allowed by the court, are insufficient to satisfy the debt and accrued interest. The motion shall be served in accordance with Rule 2-121 . It shall be accompanied by a notice advising the person that any response to the motion must be filed within 30 days after being served or within any applicable longer time prescribed byRule 2-321(b) for answering a complaint. A copy ofRule 2-321(b) shall be attached to the notice.
The circuit court ratified the auditor‘s report on June 22, 2015, and DONI moved for a deficiency decree on November 1, 2017, well within the three-year period.
Next, DONI served the motion for deficiency decree properly.
(1) by delivering to the person to be served a copy of the summons, complaint, and all other papers filed with it;
(2) if the person to be served is an individual, by leaving a copy of the summons, complaint, and all other papers filed with it at the individual‘s dwelling house or usual place of abode with a resident of suitable age and discretion; or
(3) by mailing to the person to be served a copy of the summons, complaint, and all other papers filed with it by certified mail requesting: “Restricted Delivery—show to whom, date, address of dеlivery.”
DONI indicated in its motion that it mailed copies to Mr. Pulliam, and that by itself would be insufficient to obtain proper service under the Rule. But DONI, using a private process server, then attempted to serve Mr. Pulliam personally several times. After determining that Mr. Pulliam was evading service, DONI filed a motion for alternative service. The court granted that motion on April 4, 2018, and allowed DONI to obtain service by mailing.
From there, Mr. Pulliam contends that the court failed to construe
2. DONI Provided Ample Admissible Support For Its Motion.
Mr. Pulliam argues that DONI failed to support its motion for deficiency judgment with admissible evidence. To get there, he analogizes to other civil actions, such as motions for summary judgment, district court affidavit judgments, and consumer debt actions. This case stands on an altogether different posture, though. Foreclosure is fundamentally a remedy for a failure to pay a debt. A deficiency decree is the last stage of that remedial process, and it begins after nearly everything has already been decided definitively.
First, Mr. Pulliam argues that DONI did not comply with
- That on September 29, 2006 the Defendants borrowed money from Pinnacle Financial Corporation and executed a Note and Deed of Trust secured by the property located at 4302 Lavender Lane, Bowie, Maryland 20720.
- That the Defendants defaulted under the terms of the Note and Deed of Trust, and at the direction of the noteholder, the Substitute Trustee did foreclose the Deed of Trust in the instant action.
- That Dyck-O‘Neal, Inc. is the current holder of the note as evidenced by an Assignment of Note from Federal Home Loan Mortgage Corporation attached hereto as Exhibit A.
- That there still remains due and unsatisfied to your petitioner upon the mortgage claim in the above entitled case the sum of Four Hundred Five Thousand Nine Hundred Eighteen Dollars and Fifty Three Cents ($405,918.53) as found and determined by the auditor‘s account filed herein, which said account has been by this Court finally ratified on June 22, 2015, as will appear by reference to the said account, which is hereby prayed to be taken as part hereof.
- That there remains due and unsatisfied to your petitioner, the sum of Ninety-Thousand Seven Hundred Eighteen Dollars and Thirty-Five Cents ($90,718.35) which includes pre-judgment interest on the unpaid principal at the rate of 7.125% from September 4, 2014 through October 23, 2017.
- That interest continues to accrue at the rate of Seventy Ninе Dollars and Twenty Three ($79.23) per day.
- That under the provisions of
MD Rule 14-216(b) of the Maryland Rules of Procedure, your petitioner is entitled to a deficiency decree in personam for the said sum of Four Hundred Five Thousand Nine Hundred Eighteen Dollars and Fifty Three Cents ($405,918.53) plus pre-judgment interest in the amount of Ninety Thousand Seven Hundred Eighteen Dollars and Thirty-Five Cents ($90,718.35),through October 23, 2017, against the said Defendants, being entitled to maintain an action at law against said mortgagors upon the covenants contained in the Deed of Trust filed in this case for the residue of the mortgage debt remaining unpaid and unsatisfied as aforesaid.
The one fact not already adjudicated by the foreclosure judgment was DONI‘s interest in the Note, which ripened after the foreclosure judgment. To establish that interest, DONI attached two notarized Assignments of Note (“the Assignments“) in which the Note was transferred first from Nationstar to Freddie Mac, then from Freddie Mac to DONI. Mr. Pulliam characterizes these Assignments as hearsay and, as such, contends that they were not admissible evidence of the transfer. But the Assignments aren‘t hearsay: they‘re documents that contain legally operative language critical to the action, or non-hearsay verbal acts. See Garner v. State, 414 Md. 372, 388 (2010) (“[T]he rule against hearsay does not operate to exclude evidence of the ‘verbal act’ that establish[es] a consequential fact . . . .“). Legally operative documents have “a meaning independent of the truth of the words they display. As ‘verbal acts,’ their significance ‘lies solely in the fact that [they were] made, [so] no issue is raised as to the truth of anything asserted.” Fair v. State, 198 Md. App. 1, 36 (2011) (quoting United States v. Davis, 596 F.3d 852, 857 (D.C. Cir. 2010) (a paycheck was a non-hearsay verbal act)). Here, the Assignments contained legally operative language that demonstrated something necessary to DONI‘s claim, namely DONI‘s interest in the Note, which was key to its right to seek a deficiency decree. See State v. Young, 462 Md. 159, 177 (2018). The decision to credit the Assignments as establishing that interest was within the circuit court‘s discretion, and Mr. Pulliam has identified no reason for us to conclude that circuit court abused its discretion in doing so.
We agree that
Second, Mr. Pulliam attempts to analogize deficiency decrees to affidavit judgment proceedings in District Court. Under
Third, Mr. Pulliam tries yet another analogy, this time to consumer debt collection actions. He argues that these lower-stakes cases requirе an affidavit, and “DONI failed to take the first step down the well-worn path known within the debt collection industry to collect on even a small judgment.” And this analogy fails as well, and for the same reason: the critical facts already had been adjudicated before the motion was filed.
3. Although the Interest Worksheet Was Not Hearsay, The Math Was Incorrect.
Finally, Mr. Pulliam argues that the Interest Worksheet attached to DONI‘s motion was inadmissible, and thus inappropriate evidence of damages, because it too was hearsay. Once again, we disagrеe. DONI drafted the worksheet and attached it to its motion to assist the court in calculating the debt owed by Mr. Pulliam. The worksheet indicates that the court ratified the auditor‘s report on June 22, 2015, a fact taken directly from the record. The worksheet summarizes auditor‘s finding that the deficiency was $405,918.53 and the annual interest rate is 7.125%. These facts were already contained within the documents supporting the judgment and are not hearsay, and the rest is arithmetic.
From there, Mr. Pulliam contends that the worksheet made a mistake in the interest calculation, and he‘s right. Thе circuit court entered judgment in the amount of $405,918.53, plus 1,145 days of pre-judgment interest from September 4, 2014 through October 23, 2017, which totaled $90,718.35. But the deficiency identified in the auditor‘s
JUDGMENT OF THE CIRCUIT COURT FOR PRINCE GEORGE‘S COUNTY VACATED AND REMANDED WITH DIRECTIONS TO ENTER JUDGMENT FOR APPELLEE CONSISTENT WITH THIS OPINION. APPELLANT TO PAY 80% OF COSTS, APPELLEE TO PAY 20%.
Notes
- Did the Circuit Court err by granting DONI‘s motion for deficiency judgment and by entering judgment against Mr. Pulliam in the amount of $496,636.88 when DONI failed to support its motion with any admissible evidence (e.g. proper affidavit, sworn testimony, or admissible documentation)?
- Did the Circuit Court err by granting DONI‘s motion for deficiency judgment and by entering judgment against Mr. Pulliam in the amount of $496,636.88 when DONI failed to provide the Court with a complete, admissible chain of title to its purported right to collect any deficiency from Mr. Pulliam?
- Did the Circuit Court err by granting DONI‘s motion for deficiency judgment and by entering judgment against Mr. Pulliam in the amount of $496,636.88 when DONI based its damage calculation on an unsworn, inadmissible and flatly erroneous interest worksheet?
In consideration of ONE DOLLAR ($1.00) and other good and valuable consideration paid, the abovenamed Assignor hereby assigns to the above-named Assignee, all its right, title and interest to that one Promissory Note dated 9/29/2006 in the original principal amount of $390,000.00, along with any other evidence of indebtedness such as guaranty(ies) or endorsement(s) . . . .